BBPA pub code: offering greater clarity

Brigid Simmonds, chief executive of the British Beer & Pub Association, answers 14 questions on how its new code of practice will change the pubco-tenant relationship.

1. Will the upward-only rent review pledge include a direct reference to the fact that rents can go down as well as up? If only implied, why can you not be more specific?​

Upward-only reviews have been excluded from new leases ever since the 2005 revision of the code. Companies also undertook not to implement such clauses and to provide comfort letters to that effect if requested, and to amend leases by deed of variation (at lessees' expense) if requested.

This pledge is continued through to the latest revision and we will include such phraseology as to make it clear that reviews can result in reductions as well as increases.

[The same goes for RPI-linked rent trackers. The policies will make it clear that RPI-linked rents can go up or down.]

2. Does the BBPA agree with the Royal Institution of Chartered Surveyors' (RICS) suggestion that a tied tenant should be no worse off than a free-of-tie tenant, when the benefits of the tie arrangements are taken into consideration?​

Whatever RICS decides, following its review, we will recognise and adhere to. Furthermore, that is clearly stated and enshrined in our code. What is equally clear is that RICS will be assessing the whole package when it comes to the tied and free-of-tie tenant, not just isolated elements.

In other words, issues such as the nature of the business relationship, the support and difference in business risks will be taken into account.

3. What are the benefits of the new code?​

The new code builds on existing practice, while greatly expanding on the information that must be made freely available to prospective tenants/lessees.

All BBPA codes will comply with the industry agreed code and will be accredited as such by the BII.

• Landlord and tenant obligations are made clear

• The code addresses the issues arising from assignments, placing obligations on lessees to disclose information on the same basis as landlords on the initial grant

• The code enshrines the commitment to a low-cost resolution of rent disputes

• Disclosure of information at rent review is also included in the code

• Protocol on the use of "flow meter monitoring" is mandatory within the code.

• The new code goes much further than the existing code and will extend some practices exercised by some companies to all BBPA members

• The code includes a provision that all prospective tenants/lessees undertake an accredited training course, to enable them to comprehend the terms of the contracts they are intending to agree

• All lessees/tenants must obtain a personal licence (this obviously does not apply where the contracting party is a company)

4. How will the clauses be made legally binding on both parties, including successors in title?​

The company code will be signed off by both the company and the tenant/lessee. As such, it can be relied upon in any dispute as a binding commitment on both parties.

The code will be binding on successors since they form part of the basis on which the original agreements were entered into.

5. Will that legality be preserved if a landlord member leaves BBPA? ​

Yes, since the company will sign up with its individual tenants/lessees and that commitment will continue. Pubs cannot be assigned or sold without that on-going commitment.

6. How will you make members comply?​

Signing up to the code is a condition of membership of the BBPA, and has been for the past 12 years. Should companies fail to meet the expectations of what is then in effect their own company codes, a number of things can happen.

The BII could withdraw its accreditation, which would put the company not only in a bad place publicly, but also be a breach of the membership of the BBPA. The BBPA itself can take steps to correct the behaviour of its members and has done so in the past.

In the final analysis, a breach of the code would be viewed very seriously in any legal action for breach of contract.

7. Are there any additional obligations being imposed upon tenants?​

Yes. If they are tenants with assignable leases, they will be obliged to provide information to any prospective assignee along the same lines as the original landlord.

This would go even further since in such cases full accounts will be available from the assignor and these must be made available.

Incoming tenants will also be required to comply with the following:

• Undertake an accredited course in understanding the contract and its obligations and financial implications

• Undertake appropriate training in running a pub and demonstrate that this has been done before full assignation of the contract

• Procure professional advice, both financial and structural or obtain exemption from the company where such exemption can be demonstrated to be appropriate.

8. How will this BBPA code fit with the plethora of other member codes? ​

There is not a "plethora of other member codes". All member codes must comply in full with the industry code as approved by the BBPA, BII and Federation of Licensed Victuallers Associations (FLVA).

The existence of member codes allows members to exceed the provisions of the industry agreed code tailored to their particular business models and position in the market.

9. How do you intend for the code to be policed as BII only reviews for clarity, not content or fairness?​

The BII should always have included content in its accreditation process and this will now be enshrined in the process going forward.

10. What will be the process for future amendments or can codes be changed unilaterally as Enterprise has done? ​

The industry code can only be changed with agreement by all the signatories, namely the BBPA, BII and the FLVA (and any other parties that might apply to be part of that agreement).

Companies, such as Enterprise, will always be able to change their own codes, but cannot diminish them by removing any of the obligations contained in the industry code.

Where a company wants to offer enhancements to those conditions, it must be free to offer those.

By definition, additions through company codes can only be improvements since they must meet the standards laid down by the joint industry code.

11. What happens if codes are broken and what is the appeal process?​

As explained above, there is the usual redress if the code is breached, and the BII and the BBPA in particular will see it in the industry's best interests to ensure that any problems arising are resolved quickly and effectively.

12. Which tenanted pubcos will the code not apply to?​

As it stands, companies not in the BBPA, such as Trust Inns, are not bound by the code.

However, such companies will find it difficult to stand apart and I'm sure that their tenants, possibly through the trade press, will put pressure on them to adopt the code.

13. How will the de-rentalisation of machine income by each tenanted pub company be explained and shown to tenants? Will this apply to existing tenants or be phased over the five-yearly rent review cycle?​

Machine deals are changing constantly and will be introduced over time not necessarily waiting on the rent cycle, providing of course that the tenant consents.

The agreement to place the tenant income below the divisible balance will apply to new agreements and to existing agreements on review. We do not exclude earlier introduction, but that is up to individual companies and tenants.

14. What will be the mechanism for ensuring pub tenants can test their pub company insurance against market rates?​

We have agreed to price-match on insurance policies, which means that companies are obliged to provide information as to the terms and conditions of their insurance so that tenants are in a position to obta